Oxford aspires to riches with US-style fund

A new fund was launched this morning to manage money for Oxford University colleges in an attempt to mimic the success that America's Ivy League universities have had in boosting their incomes.

Led by Karl Sternberg, a former chief investment officer at Deutsche Asset Management, Oxford Investment Management (OXIM) will start with a total of around £100m from three colleges.

Balliol has joined Christ Church and St Catherine's colleges as majority shareholders in the new business. They hold 60 per cent of OXIM, with the remainder held by its management.

It is hoped that other colleges, charities and rich individuals will be attracted to join the scheme by the expertise of its managers and the advice from Watson Wyatt, the consultant.

OXIM is to be run as a commercial company, charging fees from others that climb on board. That will allow for an income to colleges on top of their investment returns. OXIM is aiming for returns of 5 per cent above inflation over five-year rolling periods.

Both Oxford and Cambridge are facing increasingly tough competition from the leading American universities, which are much better funded.

In the United States, Ivy League schools have enjoyed impressive returns on their investments in recent years through diversified active management.

In contrast, Britain's university have largely pursued individual, more conservative investment strategies and have lagged. OXIM gives colleges the chance to pool resources.

Sir Alan Budd, a former economist for the Treasury and member of the Bank of England's monetary policy committee, now Provost of Queen's College, Oxford, has drawn up a report for the university's vice-chancellor on how to achieve better returns on investments.

One option would be for the university as whole to follow the lead of Balliol, St Catherine's and Christ Church.

Cambridge too has woken up to the need to make better use of its financial resources.

A new investment board under the chairmanship of Michael Dobson, the chief executive of Schroders, brings heavy City firepower to bear on the task of bolstering returns.

Working with a team of analysts in an office near the Judge Business School in Cambridge, its chief investment officer can call on the university's expertise to aid investment decisions.